US airport hubs: Memphis Airport

Analysis

For roughly the past month we have been looking at the US hub system, primarily at those cities that have loved and lost and how the airports and their communities have adjusted to their new reality. Some have done better than others and most, but not all, have ended up with facilities that are far larger than was once warranted.

The chart displays those cities that currently are claimed as hubs or focus cities by their carriers. The starred points are marginal, and in the case of CLE and CVG are claimed as hubs but much reduced from their heyday. As we saw, this is especially true of CVG.

US Airways claims BOS, LGA and DCA primarily because of the shuttles and a very long history at those airports, dating back to when the antecedent airlines that became USAir had strong ties to those locations. Even Phoenix has weakened for US in the face of Southwest’s presence and growth at that airport.

United claims LAX as a hub but, again, that city has seen a considerable reduction in UA service. An earlier examination of LAX and its traffic mix confirmed that the airport really has no truly dominant carrier.

As this series winds down, we will take one last look at the status and shape of all these operations through the new prism of alliances.

Which airport hubs are at risk?

But before that, the question needs to be asked if any of the remaining hubs are at risk for the kind of dramatic downsizing that occurred at CVG, PIT and STL. The answer is perhaps, based on many commonalities with those three — and it is Memphis.

Another really big chart traces the last 30 years of nonstop service from Memphis. Following deregulation, a former second tier airline, Republic, made Memphis one of its hub cities.

The carrier, formed in 1979 just after deregulation, was created by a combination of North Central, Southern and Hughes AirWest. The new airline, like one of its predecessors, North Central, was headquartered in Minneapolis (another hub) and RC also made Detroit a hub. Milwaukee was seen as a focus city.

As we saw in St Louis, the Twin Cities’ dominant legacy carrier, this time Northwest, found its smaller rival’s ambitions to be detrimental to its own interest and purchased Republic, merging its operations with Northwest’s and, voila, Memphis became a cog in a much larger wheel.

Within a very short time, the Southeastern US was awash in hubs and carriers trying to garner the largest slice of the online-connection pie. No less than six other hubs, all within roughly 500 miles, were vying for many of the same passengers. We know it did not end well with two of those cities; finding their fortunes radically altered.

By 1990, the position of Northwest had become unassailable, and in the mid 90s, NW was able to attract an Amsterdam service by its partner, KLM. Memphis was on the map. During the next decade and into the 21st century little changed, keeping Memphis’ position status quo.

Then along came Delta. The network that radiates from MEM in 2010 looks very similar to that of 2000 in terms of points served, but a closer look reveals some notable differences:

Atlanta, only 330 miles away, is no longer a competitor’s stronghold requiring a counter-offer, but rather Memphis is now overshadowed by Atlanta’s nearby predominance;

Services operated with RJs are starred, and it is immediately evident that the overwhelming majority of flights has been downsized. This is an understandable response by Delta’s competitors who only wish to feed their hubs, but under Delta’s care and feeding, the downsizing of its own equipment has been breathtaking;

There is virtually no competition with, as seen in the chart, Delta operating nearly 85% of the capacity—essentially a monopoly position;

With the exception of a few flights to Atlanta with AirTran, there is no new generation carrier presence at all;

Over half of “Delta’s” service is offered on contracted services provided by Delta Connection partners, meaning that the “real” Delta is less invested than seems at first glance.

Finally, four of the top 10 destinations from the city are to other Delta hubs, with most of the others operating to someone else’s hub.

A steady, solid but not spectacular future?

The good news is that the airport is bulletproof against any effects of future consolidation as it is now within the embrace of an already completed merger. It is unlikely that today’s Delta will merge yet again, thus making the hub more redundant.

Furthermore, Delta has made no statement regarding any changes at the airport and has, with the exception of downsizing aircraft, done little to the existing network operated there.

Nonetheless, the industry continues to exist in a period fraught with threats to the traditional legacy carrier’s operations. As was the case in PIT, CVG and STL, the pleas of the local community counted for relatively little once the airline decided to draw down a hub and all of those cities have stabilized at traffic levels consistent with O & D demands. Similarly Memphis, as the nation’s 19th largest city, probably does not have the O & D traffic to support the current 4 nonstops a day to Salt Lake. Should a drawdown come, there is a lot of redundant service that could be eliminated.

And, unlike St Louis with its decades-long Southwest presence, Memphis has no alternatives immediately at hand. For better or worse, the city is almost totally dependent on Delta for its access to the world and that carrier’s main focus is ATL; but 300 miles distant. Gives one pause for thought.

However strong Delta is or becomes, Memphis retains FedEx as its trump card. In January 2010, passenger operations (3,062) were only a quarter of the total movements, being only a third of cargo operations (9,540).

So whatever happens at Memphis in the years to come as far as airline service is concerned, stepping into a FedEx box will continue to get you virtually anywhere. Given the current dismal service reputation of most US carriers, it might even prove to be a service upgrade.

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